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Which sway for Sandler?

The potential impact of the Sandler consultation paper could turn the

financial services industry on its head. What are the origins of Sandler&#39s

take on the market&#39s possible shortcomings?

Obvious candidates include Gartmore chief executive and the trailblazer

for Sandler, Paul Myners, assisted by Treasury officials. But other

influential figures include life office analyst Ned Cazalet and possibly

former Autif director general Philip Warland.

One source told Money Marketing they believed that the individual who

wrote key parts of the Myners report was the same Treasury official who

helped pen the Sandler review. Clearly, it was the Treasury which first

commissioned Myners and defined the inquiry&#39s terms of reference. The

ongoing Treasury influence will be felt as it and FSA wrestle with the

challenges brought by their simultaneous reviews of with-profits and


Turn to the back of the Sandler review for any references to the research

material or methodology which shaped the review and you will be

disappointed. There are no references to any sources or specific research,

only references to Myners&#39 original work.

One former civil servant told MM the likely make-up of the team behind

Sandler would be high-level economists plus a secretariat. What grounding

in financial services any of the team have is unclear.

What is known of the methodology which gave rise to the scope of the

present review carried out by Sandler?

Ned Cazalet worked on the Myners review, helping the Treasury with

technical and market knowledge which helped shape the scope of Sandler.

He says: “I was retained by the Treasury scoping out what became the

review and edited a couple of chapters of the Myners report on life

insurance. It is fair to say that I was instrumental in helping the

Treasury structure what the review should look at and work out.”

Certainly, a number of Cazalet&#39s concerns are echoed in the Sandler

document. He argues that IFAs&#39 investment knowledge is critically low. He

goes so far as to argue that IFAs can only legitimately give investment

advice if they share the same skills and market knowledge as fund managers.

Cazalet says: “FPC3 is an exam with no investment element. How do you

choose between fund manager A and fund manager B if you have not been a

fund manager? Many IFAs do not know the basics of risk versus reward in

terms of whether clients will receive the pay-off relative to risk.”

His take on the role of past performance also finds its way into Sandler

consultation paper. He maintains that past performance has no relevance and

no place in investment advice.

One source close to the review suggests that former Autif director general

Philip Warland made his influence felt on the scope of the review. Recallingcomments made last year, there is some evidence to suggest common ground with Sa


In September last year, Warland announced: “I was astonished to see the

comments of my opposite number at the ABI, when Mary Francis apparently

said to the economic secretary that the Government should stop interfering

in product manufacture and let the industry get on with it. If her industry

had a 10-year pristine record, then she might have a point.”

He went on to say he believed the Government should only interfere where

it is strictly necessary and that there were few clearer cases than the

area of pensions which needed Government intervention.

Whether Sandler has hee-ded these comments as part of a mandate for reform

is unclear but what is clear is that the mounting attack on with-profits

has been driven by the unit trust industry in the shape of Myners.

But any efforts by the unit trust industry might be seen to have backfired

as all product providers are required to justify their marketing of

products and commission and, in particular, how investment products&#39

objectives are set and benchmarked.

Whatever the empirical merits of Sandler review, the financial services

industry is likely to have to be more fact-driven and scientific in its

defence of existing practices in its consultation submissions.


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